Are Gambling Winnings Passive Income?

  • Updated
  • By Daryl Charman
gambling winnings passive

If you’re wondering what passive income is, or whether your gambling winnings fall under this criteria, then you’re in the right place.

Here’s our quick guide explaining everything you need to know.

What is passive income?

Have you ever read those enticing stories online or in a book about how you can earn millions of pounds by working just four minutes a day?

Well, typically, passive income is usually associated with this concept of generating an income on a regular basis but without making any real effort to produce or maintain it.

In other words, it’s money made while you’re sleeping, eating and gallivanting.

To put it into context, an active income is your usual job where you’re limited to the hours that you work every day. As a result, an active income caps your potential earnings.

Does gambling count as a passive income?

In short, yes. Gambling can technically be classified as a passive income. But how?

Well, to generate a passive income / or an income that doesn’t need much maintenance, you need to think about something called matched betting.

Contrary to the name, matched betting isn’t a form of gambling. Instead, it’s a legal and tax-free way to generate some extra cash from the comfort of your home by utilising online bookmakers’ free bets.

Unlike an active income, passive sources like matched betting can allow you to avoid income taxes and NICs. It will also enable you to get dividends tax free in an ISA, plus it comes with no ‘associated costs’ like transportation costs to work, food and any required uniforms.

How does matched betting work?

In its simplest form, matched betting works because you always place two bets, one for a specific result and one that goes against it.

By using an online calculator, you’ll be told how much to bet and where. Basically, because you’re placing two calculated bets at the very same moment in time, they will cancel each other out.

This means that you don’t lose any money and once you add your free bets into the process, you’ll make a profit every time.

In essence, you start off by making small profits and then continue to build it up as time goes on.

And because the winnings are classed as ‘gambling’, you won’t be taxed in the UK. Once you get the hang of this, you’ll have a passive income that you’ll continue to profit on wherever you are and whatever time of day it is.